Propell Sectional Title Solutions (Pty) Ltd v Summerville Homeowners Association and Another (17198/2021; 20088/2022) [2024] ZAWCHC 187 (23 July 2024)

IN THE HIGH COURT OF SOUTH AFRICA
(WESTERN CAPE DIVISION, CAPE TOWN)

REPORTABLE

CASE NUMBER 17198/2021
In the matter between
PROPELL SECTIONAL TITLE SOLUTIONS(PTY) LTD APPLICANT
and
SUMMERVILLE HOMEOWNERS ASSOCIATION FIRST RESPONDENT
601 OWNERS OF RESIDENTIAL ERVEN IN SUMMERVILLE RESPONDENT 2-602


CASE NUMBER 20088/2022
In the matter between
THE RESIDENTS AND /OR OWNERS OF RESIDENTIAL
ERVEN IN SUMMERVILLE APPLICANT
and
SUMMERVILLE HOMEOWNERS ASSOCIATION FIRST RESPONDENT
BAEDEX FINANCIAL CORPORATION (PTY) LTD SECOND RESPONDENT
PROPELL SEC TIONAL TITLE SOLUTION (PTY) LTD THIRD RESPONDENT
CITY OF CAPE TOWN FOURTH RESPONDENT

2



JUDGMENT


BHOOPCHAND AJ:

1. Hagley is a suburb east of Cape Town in Kuils River. Several townships, such as the
Summerville development, emerged on land originally designated for agricultural
purposes but rezoned for residential expansion. This judgment concerns the
Summerville development, the residents who live there, and their contractual
relationships with third parties.

2. There are two applications before this court. In the main application under case
number 17198/2021, Propell Sectional Title Solution (Pty) Ltd as Applicant
(‘Propell’) sues the Summerville Homeowners Association, the First Respondent
(‘the Association’), and 60 1 owners of the Residential erven in Summerville, the
second-to six hundred and two Respondents ( ‘the homeowners’). Propell seeks
eight declaratory orders and an order for costs. The Association opposed the
application and filed its answering affidavit. The attorneys representing the
Association subsequently withdrew. The Association has not participated in this
application any further . There was an exceptionally belated attempt by the
Residents Group (referred to in the next paragraph) to oppose the main
application. Their participation in the main application is not permitted.1

3. In the application under case number 20088/22, known as the
counterapplication, the applicant is a group of homeowners, the Residents and/or

1 The Residents Group provided a brief argument relating to the main application, the content of which
has been ignored in this judgment.
3

owners of Residential Erven in Summerville, Hagley ( ‘the Residents Group’).2 The
Respondents cited in this application are the Association, Baedex Financial
Corporation (Pty) Ltd (‘Baedex’), Propell, and the City of Cape Town. In this
application, the Residents Group sought to join four further Respondents : Renier
Van Rooyen, Johan Odendaal, Colin Wagenaar, and Bonginkosi Khumalo . The
latter served as Trustees of the Association in 2010.

4. The Residents Group seeks four declaratory orders and further relief, including an
order f or costs. Baedex and Propell opposed this application and filed their
answering affidavits. The City of Cape Town filed a notice to abide but provided an
explanatory affidavit relating to its involvement in the development. Renier Van
Rooyen, the developer of Summerville and Trustee at all times material to these
applications, likewise, chose to abide the court’s judgment but filed an
explanatory affidavit. The Residents Group unprecedently, in February 2024,
attempted to reincarnate their entire application by filing a second set of papers
wherein they included an answer to the founding affidavit in the main application.
The court permitted the Residents Group to raise a supplementary affidavit to the
founding affidavit of the counterapplication alone . Baedex and Propell duly
answered the second set of papers to the extent that their content constituted
matters of a supplementary nature. More on this later.

5. In 1997, an application was granted for rezoning, subdivision, and closure of
public roads on portions 1 -4 of Farm 439 and the remainder of the farm .3 The
application and approval occurred in terms of the Land Use and Planning
Ordinance of 1985 (LUPO). 4 Six hundred and seven single residential dwellings,
public open spaces, a service station, a neighbourhood centre, and a place of
instruction were approved. The development began in earnest in about 2006 after

2 Since the inception of the counterclaim, the number of these applicants has grown to 161. It is
unclear whether they are owners or joint owners.
3 Farm 439 was originally part of Farm 1479 and comprised four portions and a remainder , which
became Erf 2501. Erf 2501 was further subdivided into 16 portions.
4 The Spatial Planning and Land Use Management Act have replaced LUPO, 16 of 2013 (SPLUMA) and
the Western Cape Land Use Planning Act, 3 of 2014 (LUPA).
4

further applications were made to extend the validity period of the approved
rezoning and subdivision. A part of the land on the envisaged development had to
be excised and allocated to informal dwellers who had occupied the development
site.

6. Section 29 of LUPO made provision for homeowners’ associations in rezoned
land. The rezoning and subdivision conditions do not specify the formation of a
homeowner’s association for the Summerville development . The developer
envisaged that all homeowners should be members of a voluntary homeowner ’s
association and proceeded to include this condition in the title deeds of each of
the erven sold in the development.

7. The City of Cape Town, cited as the Fourth Respondent in the counterclaim,
provided an explanatory affidavit, the upshot of which was that the City did not
impose a condition requiring the compulsory establishment of a homeowner’s
association in terms of s ection 29 (1) of LUPO. After being a bone of contention
between the parties, The Respondents Group belatedly conceded that the
approval of the development did not contain a condition that required the
formation of a homeowner’s association in terms of LUPO.

8. There are thus two applications to consider. The court is directed to hear them
together, but not as a consolidated matter .5 The content of the declaratory relief
sought across both applications is interrelated, and the key s upporting
documents are the same, although the reliance placed therein differs. Litigation
between the key parties to the two applications has endured over ten years in
various forms in this court and the Kuils River Magistrates Court . The court has
endeavoured to evaluate the evidence properly placed before it , but it shall
consider each application separately and, on its merits, and make the appropriate

5 As per an order of court granted by agreement on the 28 April 2023. There is no order to consolidate
the two applications, although the application made on behalf of Propell and Baedex sought
consolidation of the matters. Propell subsequently disclaimed any reliance on the consolidation of
the applications and submitted repeatedly that the applications should be determined separately
on their merits.
5

orders relevant to each , as the evidence and the application of the law to that
evidence directs.

9. This court issued two directives, the first before the hearing of oral argument, to
clarify the relief sought in the main application and ascertain the position if the
Residents Group did not pursue their application.6 The second directive allowed
the parties to address information of a material nature that ha d been placed
before the court but not addressed properly or at all by them. In addition, the court
asked the parties to address specific issues during oral arguments. All in all, the
circumstances required it, and the parties were given ample opportunity to
ventilate their matters as comprehensively as possible.

10. For convenience, the contents of the affidavits filed, and the written and oral
submissions made on behalf of the parties shall be attributed to the parties rather
than to the respective deponents and legal representatives that made them . The
court accepts that the applications are properly authorised. To the extent that
evidence identified as hearsay is referred to in this judgment, the parties can
assume that the court has considered the factors identified in section 3(1) (c ) of
the Hearsay Evidence Ame ndment Act and that the court believes that such
evidence should be admitted in the interests of justice.

THE TITLE DEEDS

11. The clause re quiring compulsory membership of a homeowners’ association ,
inserted in the offer to purchase and the title deeds of residential erven in the
development, read as follows:


6 The Residents Group had failed to abide the court orders necessitated by the postponement of the
applications in February 2024 and nothing further was heard from them until the eve of the
scheduled hearing.
6

“The transferee shall, as the owner of the herein mentioned property, be a member
of the Summerville Homeowner’s Association and may not sell or alienate the
property without the prior written consent being obtained from the Summerville
Homeowners’ Associa tion in terms of the Constitution of the Summerville
Homeowners’ Association. ”

12. The Supreme Court of Appeal, in deciding whether a clause of this nature inserted
into a title deed constitutes a real or personal right, held that

“To determine whether a right or condition in respect of land is real, two
requirements must be met: (a) the intention of the person who creates the right
must be to bind not only the present owner of the land, but also successors in title;
and (b) the nature of the right or condition must be such that its registration results
in a ‘subtraction from dominium’ of the land against which it is registered. Whether
the title condition embodies a personal right or a real right which restricts the
exercise of ownership is a matter of interpretation. The intention of the parties to
the title deed must be gleaned from the terms of the instrument i.e., the words in
their ordinary sense, construed in the light of the relevant and admissible context,
including the circumstances in which the instrument came into being. The interest
the condition is meant to protect or, in other words, the object of the restriction,
would be of particular relevance. ”7

13. The dictum in Willow Waters requires a case-by-case interpretation of conditions
inserted into title deeds to determine whether the particular clause constitutes a
real or personal right . The interpretation follows established legal prin ciples
involving the triad of text, context, and purpose.8

7 Willow Waters Homeowners Association (Pty) Ltd v Koka N.O. and Others (768/2013) [2014] ZASCA
220; [2015] 1 All SA 562 (SCA); 2015 (5) SA 304 (SCA) (12 December 2014) (Willow Waters) at
paragraph 16, see also Cape Explosive Works Ltd v Denel (Pty) Ltd [2001] 3 All SA 321 (A)
8 Natal Joint Municipal Pension Fund v Endumeni Municipality [2012] ZASCA 13; 2012 (4) SA 593
(SCA), Novartis SA (Pty) Ltd v Maphil Trading (Pty) Ltd [2015] ZASCA 111; 2016 (1) SA 518 (SCA),
Coopers & Lybrand v Bryant [1995] ZASCA 64; 1995 (3) SA 761 (A), Novartis SA (Pty) Ltd v Maphil
Trading (Pty) Ltd [2015] ZASCA 111; 2016 (1) SA 518 (SCA)
7


14. The wording of the clause inserted in the Summerville title deeds poses no
interpretational difficulties as it is couched in generic terms. The owner of land in
the development must be a member of the homeowners’ association. Owners
may not sell their properties without the prior written consent of the homeowner’s
association, and the homeowner’s consent to owners to sell their properties shall
be in accordance with the provisions of the constitution. Using the word “shall”
imposes a mandatory requirement and implies that an owner must be a member
of the homeowner’s association. On the other hand, the word “may” expresses
possibility, a permissive choice to act or not, and ordinarily implies some degree
of discretion. 9 The word ‘may’ could also be construed as a mandatory
requirement.10 The court needs to explore the context and purpose of the text
relating, in particular, to the second condition to determine the ambit of any
alleged restriction or embargo included in the title deeds.

15. The legal representatives had resolved any dispute as to whether the
homeowner’s association was formed under section 29 of LUPO as well as the
nature of the homeowner’s association, before oral argument was completed.
There was thus no statutory compulsion on the developer (as was the case in
Willow Waters) to insert the condition in the title deeds. The developer confirmed
that he asked for the clause to be inserted into the title deeds and for the formation
of a homeowner’s association. 11 The developer explained that any reference to
LUPO in the constitution was his attorney’s error. The developer referred to clause
4.5 of the constitution , which is not in the court’s copies .12 Clause 4.6 refers to
LUPO. In addition, the tenor of clause 1.2 would suggest that it was drafted under
the erroneous belief that the Association was formed as a precondition of section
29 of LUPO. Clause 1.2 states that:

9 Cornell Law School, Legal Information Centre (https://www.law.cornell.edu/wex/may)
10 Saidi and Others v Minister of Home Affairs and Others [ 2018] ZACC 9 at 16 et seq , Trustees for the
time being of Groundwork Trust and Another v Minister of Environmental Affairs and Others
(39724/2019) [2022] ZAGPPHC 208 (18 March 2022) at paras 184 et seq and the cases cited therein
on the interpretation of the word “may”
11 Confirmatory and explanatory affidavits of Renier Van Rooyen
12 Clause 4.4 is repeated in the constitution.
8


“It is a condition precedent in any agreement of sale of any sub -divided portion
and in respect of a title deed of any sub -divided portion of erf 2501 Hagley in the
City of Cape Town, Stellenbosch Division, Province Western Cape, that the
purchaser and subsequent owner of any sub-divided portion will be a member of
the Summerville Homeowners Association and that the Summerville
Homeowners Association is to consent to the transfer of a third party of a sub -
divided portion. ”

16. The two clauses that were erroneously included in the constitution cannot,
therefore, point to the developer’s intention to incorporate the conditions in the
title deeds. The developer stated in his explanatory affidavit that he was informed
that the conditions specified in the title deeds constituted a real right over the
respective erven in favour of the Association. 13 The court cannot determine the
developer's intention when the conditions were inserted into the title deeds and
when the erven in the development were first registered. The court looked to the
other provisions in the constitution to determine whether they shed any light on
the developer's initial intention to form a homeowner’s association.

17. The constitution states that the Association’s main business is to promote ,
advance, and protect its members . The objects of the Association amplify the
interests of the members, the control over buildings in the common areas ,
maintenance and security of the complex, the development of a congenial
environment to enable members to derive the maximum collective benefit
thereof, adherence to conformity in home design, the control of roads and public
open areas, and to ensure that the development contract between the developer
and the City of Cape Town is strictly adhered to.

18. Clause 6.5 of the constitution specifies that a member shall not be entitled to sell
or transfer an erf unless it is a condition of the sale and transfer that the transferee

13 Many years later, at the time he deposed to his explanatory affidavit
9

shall become a member of the Association. A member shall first obtain the written
consent of the Association , which shall be given provided that the purchaser
agrees in writing to abide by the rules of the constitution. The latter provision in the
constitution is couched peremptorily. It must be read together with clause 6.13.

19. Clause 6.13 of the constitution is drafted in permissive or optional terms. It states
that a member who sells his erf shall, when called upon to do so, furnish the
committee or the Agent with a certified extract of the lease agreement or deed of
sale as proof that the transferee becomes a member of the Association, Clause
6.13 is qualified by clauses 6.5.1.1, 6.5.1.2, and 6.5.1.3, the first two of which
relates to compulsory membership. Clause 6.5.1.3 imposes a further
requirement, i.e., the purchaser of a unit erf has to agree in writing to abide by the
rules of the constitution. The issu ing of clearance certificates is linked to
membership of the Association alone in the unamended version of the
constitution. The wording of the amendments effected to the constitution in 2010
and dealt with further in this judgment sought to correct the link between
membership, the collection of levies and the issuance of clearance certificates .
(‘consent/s’ , ‘consent certificates’). The legality of the amendments is placed in
question in the counterapplication.

20. The offer to purchase contains the exact condition in the title deeds.14 In addition,
it requires the purchaser to acknowledge responsibility for the payment of
monthly levies to the Association. It does not link the payment of levies to the
issue of certificates of consent. T here is no indication in the unamended version
of the constitution that the payment of levies or any debt accrued by a member to
the Association would be a bar to the subsequent sale of a member’s property.
The clauses relating to levies are liberally couched. The tenor of the collective
evidence does not point to any restrictions intended beyond the initial owners of
erven in the complex. Even if the court were to accept th e converse, the second
stage of the inquiry does not yield a conclusive answer.

14 Clause 20
10

21. The second stage of the inquiry relat es to whether the conditions imposed in the
title deeds subtract from the dominium of the land against which it is registered .
A limited real right implies that whilst the dominium remains with the owner,
certain rights of use and enjoyment are placed at the disposal of a third party to
the owner's exclusion . The objectives and functions of the Association are
directed towards developing community congeniality, cohesiveness,
collaboration, and good neighbourliness . Compulsory membership of a
homeowner’s association and an option to obtain a clearance certificate on
disposal of a property in the complex cannot be construed as a restriction on the
owner's use and enjoyment of their properties.

22. What all of the aforegoing means is that the clause inserted in the title deeds of
erven in the development is distinguishable from that included in the title deed in
the Willow Waters and Kyalami Estates15 matters. The interpretation of the clause
provides a distinguishable outcome, i.e., that the clause does not constitute a
limited real right in favour of the Association. The conditions inserted into the title
deeds are personal rights arising from the constitution, binding the homeowners
and the Association contractually.16

23. In arriving at this conclusion, the court is cognisant of the provisions of section
63(1) of the Deeds Registries Act 47 of 1937, that no deed or condition in a deed
purporting to create or embody any personal right and no condition which does
not restrict the exercise of any right of ownership in respect of any immovable
property, shall be capable of any registration.17 The court has also considered the
cases cited in paragraph 30 of the Willow Waters matter before arriving at this
conclusion, i.e.,

15 Cowin N.O. and Others v Kyalami Estate Homeowners Association and Others (499/2013) [2014]
ZASCA 221 (12 December 2014) (‘Kyalami Estates’) (judgment was delivered on the same day as the
Willow Waters matter.
16 Mount Edgecombe Country Club Estate Management Association II (RF) NPC v Singh and Others
(323/2018) [2019] ZASCA 30; 2019 (4) SA 471 (SCA) (28 March 2019) at 440 F -G, Nuwekloof Private
Game Reserve Farm Owners’ Association v Hanekom N O and others (A163/2 022) [2023] ZAWCHC
10 (30 January 20230 at para 22)
17 Willow Waters at para 21
11

“ …the Court should be very careful in dealing with the Registry of Deeds…. It
would be no light matter for the Court to declare of no value rights which have
been registered against title, which have been looked upon by the public as
valid, and upon the faith of which numerous transactions have been entered
into. ’18

24. Absent any explanation as to why the Association was formed, the best that
interpretation of the relevant constitutional clauses does is that it categorises the
Association as your everyday voluntary association , and in this case, promoting
community congeniality and cohesion with a few expenses to pay. In the
circumstances, the clause inserted into the title deeds cannot be construed as a
real right. The conditions, at most, create a personal right between the owners and
the Association. The conditions imp ose an obligation to join a voluntary
association and an option to seek the consent of the Association on alienation of
the erf as long as one remains an owner of an erf in the complex. The fact ors that
strengthen the above reasoning are that the City of Cape Town provides municipal
services to the development and maintains it s common areas. Owners are
expected to pay their municipal charges directly to the city. The complex is not
gated. A gate was initially erected at the entrance to the complex but was removed
by the City of Cape Town. Amendments effected to the constitution in 2010 are
directed at rectifying these omissions. The latter aspect receives attention further
in this judgment.

THE HOMEOWNER’S ASSOCIATION AND ITS CONSTITUTION

25. Development of the complex began in earnest in 2006. Clause 1.1 of the
constitution states that the Association shall be deemed to have existed on 15
June 2006. Clause 31 of the constitution states that its provisions will be effective
from 15 June 2006. Propell asserted that the developer drafted and adopted the

18 Willow Waters (supra) at para 30 citing Registrar of Deeds (Transvaal) v The Ferreira Deep Ltd , and
Hollins v. Registrar of Deeds
12

constitution at the end of 2007. The Residents Group referred to a letter dated 18
January 2008 addressed to the developer. The attorneys from whom the letter
emanated refer to the final drafts of the constitution and confirm that copies will
be distributed amongst the various owners.19

26. Clause 6.1 of the constitution states that membership of the Association shall be
compulsory for every registered owner of a unit erf. It is apparent that there was
no written constitution at the time the development of Summerville began , and
there is no evidence to contradict this observation. Owners who purchased
properties before they received copies of the constitution, if at all, after January
2008 would not have seen the document when they signed their offers to
purchase.

27. Clause 20 of the sample offer to purchase concerns the homeowner’s
association. It states that the parties agree that upon registration of the property
into the purchaser’s name, the purchaser will automatically be bound by the terms
and conditions of the constitution, including any amendments and/or additions to
it and/or any new constitution in substitution thereof, and any rules made in terms
thereof. Clause 20.1 of the sample offer to purchase20 states that:

“The Purchaser declares that it has scrutinised the constitution of the
Homeowners Association and agrees to be bound thereby from the date of its
occupation of the property. ”

28. Clause 20.4 states that the purchaser acknowledges that it is aware that as a
member of the homeowner’s association , it shall , with effect from the date of
transfer, be responsible and liable for payment of a monthly levy to the
association. There is no indication as to whether the homeowners who purchased
properties in the development before the adoption and circulation of the

19 Annexure “LH 168” to the supplementary papers filed by the Residents Group
20 “AS5” to the founding affidavit in the main application
13

constitution subsequently ratified the document. The fact that the Developer’s
attorney drafted the constitution based on the erroneous belief that the
Association was statutorily mandated is also material. There is no evidence that
clauses 1.2 and 4.5 were ever amended. The latter may, on its merit, invalidate the
constitution. The court shall assume that the constitution is the constitution that
applies to the determination of the declaratory orders sought in the two
applications.

THE AMENDMENTS TO THE CONSTITUTION

29. On 21 September 2010, a special and annual general meeting of the Homeowners
Association was held. The minutes reflect that a quorum was present. 21 The
minutes do not reflect the number of members present . The court understands
that neither the attendance register nor a list of the members who attended th e
special or the annual general meeting that followed in person or by prox y is
available.

30. The original constitution did not provide for external financing of the Association,
nor did it stipulate that consent for the sale of properties in the development
would occur upon payment of any debt owing to the Association . At the special
general meeting, the developer and Trustees suggested amendments to the
constitution, presumably to address the omissions and to obtain financing for the
Association.

31. The minutes record that a representative of Baedex “explained in detail” how the
financing from Baedex “to owners” would work. The members present voted
unanimously to effect the amendments to the constitution and approve financing

21 “AS 8” to the main application
14

from Baedex. The minutes of the annual general meeting reflect that a quorum was
present, and the monthly levies were increased to R200 monthly.22

32. The amendments to the constitution entailed the insertion of clauses 15.6 and
15.7 to the constitution. Clause 15 relates to the functions and powers of the
Trustee Committee. The wording of the clauses as approved read as follows:

32.1. Clause 15.6: The Trustee Committee may from time to time borrow
moneys required by it in the performance of its functions or the
exercise of its powers and for the purpose of the Association, the
repayment of which shall be included in the levies raised in
accordance with paragraph 6 above , subject to approval by the
members in a general meeting of the Association.
32.2. Clause 15.7: The Trustee Committee shall give its written consent to a
member selling or transferring a unit erf on application for consent by
such owner if the member has paid all amounts due by the member to
the Association.

33. Clause 32 deals with amendments to the constitution. Clause 32.1 stipulates that
Clauses 1 (Establishment of the Association), 2 (Interpretation), 3 (the main
business), 4 ( Objects), 6 (Membership), 7 (levies), 8 (the common area), 33 (status
of the developer), 34 (Access to the development), and 35 (development and
building guidelines), may not be amended. These are entrenched provisions in the
constitution and are equivalent to non -variation clauses in contracts. 23
Amendment or repeal of any other part of the constitution had to be effected by
special resolution at an annual general meeting or a general meeting. The latter
stipulation in the constitution illustrates an alternative interpretation when the
word ‘may’ is used in a clause. The constitution makes provision for amendments

22 The previous levies amounted to R140 per month. The court was informed that the current levy
amount is R290 per month.
23 Tre Donne Homeowners Association and Another v Bergwater Plase CC (A476/14) [2016] ZAWCHC
69 (9 June 2016) at paragraphs 14 et seq.

15

to the non -entrenched clauses but forbids any amendment to the entrenched
clauses. It is debatable as to whether the constitution permitted the developer to
amend these clauses , more so given that the developer and the Trustee
Committee went to the membership to approve the amendments.

34. On the face of it, the amendments did not seek to amend any of the entrenched
clauses. On closer scrutiny, the substance of the amendments proposed by the
Trustees deals with contracts (clause 9), levies (clause 7), and the issue of
clearance certificates on alienation of properties in the complex (part of clause 6,
the membership clause). The amended clause 15.6 refers to clause 6, the
membership clause, whereas the proposed amendment relates to clause 7, the
levies clause. Clause 15.6 conflicts with clause 7, the levies clause, which has to
be construed as a closed set of conditions for raising and collecting levies. Clause
15.7 conflicts with clauses 6 and 7, entrenched clauses that did not link owners'
debt repayment to the issuance of consents on alienating their properties. Clause
32 of the constitution does not allow any amendments to clauses 6 or 7 of the
constitution.

35. The purpose of entrenched clauses in constitutions is multifold. These include the
protection of the association’s purpose, the safeguarding of members' rights and
interests, and the provision of a framework for resolving disputes. Entrenched
clauses prevent hasty or unilateral changes to the constitution, limit the power of
leadership or majority members, ensure stability in the association's governance,
and ensure that constitutional changes are carefully considered and widely
accepted. The court is left with the lingering impression that the amendments to
the constitution aimed to circumvent the entrenched clauses.

36. Clause 17.3 states that all general meetings other than annual general meetings
shall be called special general meetings. As clause 2 of the constitution defines ,
a special resolution needs specific notification. This notification must specify the
intention to propose the special resolution, the terms and effect of the resolution,
the reasons for it, and the quora and voting requirements for the passage of the
16

resolution. A special resolution proposed at a special general meeting requires 21
days’ notice. The resolution would be passed by a show of hands of not less than
three-quarters of the total number of members present. The number present
should form a quorum for a general meeting of the Association. Five per cent of
the total votes of all members constitutes a quorum for a general meeting (clause
20), except that not less than three members must be personally present (where
proxies would make up the remainder).

37. The Trustee Committee is the Association's Board of Trustees .24A Trustee is
defined as one of the Trustee Committee. Clause 9 of the constitution relates to
contracts and regulations. Clause 9 does not refer to other agreements beyond
those with local authorities. Clause 12 states that the Trustee Committee shall
consist of three members. Clause 33.1.1 permits the developer to nominate a
representative to act as a Trustee on the Board of Trustees. Clause 16.6 states,
among others, that no resolution or purported resolution of the Trustee
Committee shall be of any force or effect or shall be binding upon the members or
any of the Trustees unless such resolution is competent within the powers of the
Trustee Committee.

38. Clause 15.6 permitted the Trustee committee to borrow money occasionally. The
clause is ambiguous. It is unclear as to whether the funds borrowed had to be
approved by the members in a general meeting , whether any additions to the
levies raised had to be approved, or whether the monies borrowed, as well as any
adjustment to the levies payable by members , had to be approved by the
members in a general meeting. Clause 6, referred to in the amended clause 15.6
of the constitution , relates to membership of the Association. The amendment
initially mooted by the developer and the Trustees referred to clause 7, the levies
clause, instead of clause 6, the membership clause, the latter being the approved
reference clause.


24 Clause 2 of the constitution
17

39. The minutes of the special general meeting record that although the constitution
allows the developer to make changes, the Trustees (presumably), the developer,
or both wanted the owners to be part of the decision and understand its content .
Clause 32.2 of the constitution allowed the developer to make changes to the
constitution without the members' approval during the development period.

THE LEVY FINANCE AGREEMENT AND THE CESSIONS

40. On 9 November 2010, Baedex and the two Trustees, on behalf of the Association,
concluded the Levy Finance Agreement.25 Renier Van Rooyen and Johan Odendal,
the “Developer’s Trustees” , signed the agreement on behalf of the Association on
an unspecified date. Their signatures were not witnessed.

41. Baedex made R1 000 000 minus certain deductions available to the Association
at an interest rate of 34.8% per annum, calculated daily and compounded
monthly. A separate schedule listed the charges Baedex intended to levy to
administer and collect the levies. The charg es included cash handling fees,
monthly administration and collection fees, legal fees incurred in collecting levies,
and fees for issuing consents. The schedule specified arrangements for the
payments to the Association and how amounts collected would be set off against
the loan balance.

42. On 12 July 2011, Baedex and Propell concluded a written sale and cession
agreement. The agreement and addendum make no specific reference to the Levy
Finance Agreement concluded between Baedex and the two Trustees on behalf of
the Association. 26 Propell avers that Baedex ceded all its rights in terms of the
agreement to Propell by the terms of clause 3.3 of the sale and cession agreement
between Propell and Baedex. Clause 3.3 of the sale and cession agreement states

25 “AS10” to the main application.
26 Propell claimed in the main application that it had locus standi to bring the application by the
cession.
18

that Baedex cedes all their rights held in terms of the qualifying assets to Propell
on the effective date, i.e., 12 July 2011. The qualifying assets listed in the sale and
cession agreement schedule include Baedex’s Levy Guarantee Debtor book. In an
addendum to the sale and cession agreement, the definition of the Levy
Guarantee Debtor Book was amended to mean all outstanding balances in terms
of levy guarantee loan agreements, inclusive of all the rights flowing from any levy
guarantee loan agreements and levy finance agreements (irrespective of the name
given to the agreements), concluded by Baedex, as at the effective date.27

43. The Levy Finance Agreement incorporated the loan agreement, the collections
and administration of levies agreement, the power of attorney agreement, and the
cession agreements. The cession agreement would be effected upon an event of
default. The terms of the agreement classify the cession as a pledge or a cession
in securitatem debiti. The security cessions as rectified included the right to issue
consents on alienation of an erven and the right to the levies owed by the
homeowners. The security cessions covered the Association’s ob ligations to
Baedex arising from the contract. The principal debt between the homeowners
and the Association is intended to secure the repayment of the secured debt. 28
The agreement permitted Propell to collect levies from the homeowners until the
association's debt was discharged.

44. On 8 February 2017, Propell obtained an order from this court to rectify the Levy
Finance Agreement. 29 The Association was cited as the Respondent in the
application for rectification. The rectification involved deleting clause 6 of the
Agreement and replacing it with the rectified clause. Clause 6 related to the
security cessions and collection of Levies. The rectified clause allowed for the
following:

27 Andres Van Schaik, the deponent to Propell’s founding affidavit in the main application , signed the
undated addendum on behalf of Baedex and Propell.
28 Grobler v Oosthuizen 2009 (5) SA 500 (SCA), Engen Petroleum Ltd v Flotank Transport (Pty) Ltd
(876/20) [2022] ZASCA 98 (21 June 2022)
29 Case number 24358/2016. Clause 6 of the agreement was rectified and In addition, the description
of how the Association was formed was amended by court order.
19

44.1. As security cover for all of the Association's obligations to Baedex, the
Association ceded and pledged to Baedex by way of cession in
securitatem debiti:

44.1.1. the right to issue consents to owners on transfer, alienation,
or other disposition of any erf in the township (“the consent
claims”),
44.1.2. the rights to any claims for loss suffered due to theft or
misappropriation of trust monies that it has or may acquire
against the Fidelity Fund (“the theft claims”),
44.1.3. The rights to the levies and non -levy amounts owing by
owners to the Association at the commencement of the
agreement and in the future (“the contributions claims”)

44.2. The cession of the contributions claim would only occur upon the
occurrence of an event of default ; after that , such cession shall take
place automatically and without any further notice or any steps or
formalities required by either party,
44.3. The Association ceded future rights in anticipation without the need for
the parties to take any further steps to give effect to the cession,
44.4. The Association's reversionary rights were retained unless the
Association ceded any of the security rights (the consent, theft, and
contributions claims) to a prior cessionary,
44.5. The Association appointed Baedex from the commencement date as
its lawful attorney and agent with the power of substitution to do all
things necessary to collect the outstanding owner amounts, attending
to prior cessionaries, applying the monies received under such
collection in reduction or settlement of the outstanding loan, to sign
any document for the purpose above and generally for such purpose to
do everything necessary in addition to that and the Association was
20

required to confirm everything that Baedex had to do in terms of a
power of attorney contained in this clause,
44.6. The security collections and the power of attorney would remain in full
force and effect for as long as the Association remain ed indebted to
Baedex, notwithstanding any cancellation of the loan agreement for
whatever reason,
44.7. The Association authorised Baedex to fulfil the collection and
administration services for the duration of the loan , as long as any
amounts remain owing to Baedex as the exclusive and sole agent of the
Association. Baedex undertook to:
44.7.1. Issue monthly statements of accounts to owners reflecting
the levies and non-levy amounts payable by the owners
44.7.2. Trace most recent owner details,
44.7.3. Send demands to owners who ha d failed to pay levies on
the due date
44.7.4. Take steps as it deem ed appropriate in its reasonable
discretion to recover payment of outstanding owner
amounts, including appointing attorneys as it considered
appropriate to institute legal proceedings against defaulting
owners in its name or the name of the Association,
cancelling the mandate of any attorney who ha d already
been instructed to initiate such proceedings, grant
concessions to defaulting owners and/or conclud e any
other settlement arrangements or compromises as it
deemed appropriate with defaulting owners on behalf of the
association,
44.7.5. Divulge such information to bondholders as may be
required to ensure the bondholder's cooperation during the
collection process,
44.7.6. Charge and debit the levy accounts of owners with all levies
and non -levy amounts payable to the Association by the
owners,
21

44.7.7. Set off and apply all monies received in collecting the
outstanding owner amounts in reduction or settlement as
the case may be of the outstanding loan balance,
44.7.8. Debit the outstanding loan balances with all legal and other
costs incurred and ow ed to third parties in recovering
outstanding owner amounts,
44.7.9. Issue consents when required.

44.8. The appointment of Baedex as exclusive and sole agent regarding
collection and administration services would not derogate from
Baedex’s rights as cessionary of the security,
44.9. The Association would be liable for any expenses incurred by Baedex
and payable to any third party in fulfilling the collection and
administration services , which shall be debited to the loan as and
when such costs are incurred
44.10. Baedex will furnish the Association with a monthly schedule reflecting
the outstanding owner amount as at the monthly advance date of the
preceding calendar month, the total monies recovered from owners up
to the monthly advance date, all fees and costs incurred in the
collection or administration of the outstanding owner amount and the
application of the funds received, monthly collections progress report
setting out the current status of all collection matters, and any other
report reasonably requested by the Association regarding the
collection and administration services provided that Baedex ha s
access to the necessary data and has the system capacity needed to
generate such other report.

45. The court could not help but notice that the order of 6 February 2017 was obtained
by the attorney firm representing the Association.30 The Association subsequently
dismissed this attorney firm sometime in August 2020. 31 Amendments to

30 “AS 12”
31 “AS 21”
22

agreements are usually effected by the consent of the other parties to the
contract. The court raised the issue of a conflict of interest on the part of the
attorney firm representing both Propell and the Association. The attorney
representing Baedex and Propell in the counterapplication explained how this
situation arose. The court is not convinced that no conflict of interest occurred .
When the rectification order was obtained, Propell had a power of attorney to
represent the Association in matters relating to the Agreement. Propell would have
provided instructions for itself and the Association in the rectification application.

46. The terms of the Agreement provide some insight into the growth of the loan.
Baedex undertook to make the first advance of the loan of R1m to the Association.
For the duration of the loan , Baedex undertook to advance to the Association a
monthly amount equivalent to the monthly levies due to the Association, credit
interest accrued, and subtract its fees. Baedex held a right to exclude certain levy
amounts from its advances to the Association . Baedex agreed to make further
loan advances to the Association. Baedex’s fees included initiation fees,
collection and administration fees, legal costs , and other expenses incurred in
collecting outstanding levies. Baedex would capitalise the charges due and
payable by the Association to the outstanding loan balance , which would
supposedly not exceed the loan amount of R1m. The Association could obtain re-
advances on the amounts which had been pre-paid or repaid.

47. The levy amounts collected from the owners would be applied in a sequence
comprising payment to the Association, a set off against the outstanding loan
balance in payment of fees and costs, set off against the outstanding loan balance
in payment of interest, set off against that portion of the outstanding loan balance
attributable to the financing of any additional lev y, and finally against the
remaining outstanding loan balance. The court was informed, upon direct inquiry,
that the current loan balance is approximately R15m, half of which comprises
interest charges. The court understands that all the levies collected since 2020
have been allocated to reducing the outstanding loan amount. Propell denies that
the homeowners are responsible for the payment of the debt. They allege that the
23

homeowners are expected to pay their levies alone, the right to collect them being
ceded to Baedex. With the collapse of the Association and the enforcement of the
cession agreement, the liability to settle the loan amount falls to both the paying
and non-paying homeowners.

48. The nature of the cession agreement described in the levy finance agreement is
akin to a pledge and not an out-and-out cession. In the rectified section 6 of the
Agreement, it is noted that the classification of the cession in securitatem debiti
was removed from the original clause 6. Although the cession agreement involved
the Association as cedent, Baedex as cessionary, and the homeowners as the
debtor of the Association, i.e., a triangle of parties to the cession Agreement, the
cession takes place in the event of default without the concurrence of the
homeowners.32

49. The court turns to consider the relief sought in the main application.

THE RELIEF SOUGHT IN THE MAIN APPLICATION

50. Considering the decade-long history of litigation in this court as well as in the Kuils
River Magistrates Court between the key proponents, i.e., Propell in the main
application and the Residents Group in the counterapplication, and other
homeowners the court has undertaken to consider and adjudicate the plethora of
declaratory orders sought in both applications. The legal principles of granting or
refusing declaratory orders are now trite.33 Justice and convenience demand that
the declaratory orders sought across both applications are adjudicated.34

32 Lynn & Main Incorporated v Brits Community Sandworks CC (348/2007) [2008] ZASCA 100 (17
September 2008) at para 6
33 Section 21 (1)(c ) of the Superior Courts Act 10 of 2013, which replaced the identical section 19(1)(a)
(iii) of the repealed Supreme Court Act 59 of 1959 , and numerous cases , including Durban City
Council v Association of Building Societies, 1942 AD 27 at 32A, Cordiant Trading CC v Daimler
Chrysler Financial Services (Pty) Ltd (237/2004) [2005] ZASCA 50; [2006] 1 All SA 103 (SCA); 2005 (6)
SA 205 (SCA) at para 18, Erasmus, Superior Court Practice at D228 and the cases cited therein.
34 Adbro Investment Co Ltd v Minister of the Interior and Others 1961 (3) SA 283 (T) at 285 B -D, Eagles
Landing Body Corporate v Molewa NO, 2003 (1) SA 412 (T) at 432, NAPTOSA and Others v Minister of
24

51. There is, in effect, no opposition to the eight declaratory orders sought by Propell
in the main application. 35 The Association’s lawyers had withdrawn, and no
representations were made on behalf of the Association at the hearing of the
applications. The main application thus falls to be heard on the papers filed by
Propell alone. This does not mean that the court will rubber-stamp the orders
sought by Propell.

52. In response to the issues raised in this court's second directive, Propell reminded
the court of the dicta expressed in paragraphs 21 to 23 of Four Wheel Drive
Accessory Distributors CC v Rattan NO .36 These paragraphs confine a judge to the
issues pleaded by the parties, emphasise the judge's independence, impartiality, and
neutrality, and warn that the risk of judicial intervention may create an apprehension
of bias. The parties must identify the dispute, and the court must determine that dispute
and that dispute alone. Four Wheel Drive and Fischer v Ramahlele permit a court to
consider legal points emerging from the papers, including the documents the parties
relied upon. The relevant paragraph reads as follows:

“There may also be instances where the court may mero motu raise a question of
law that emerges fully from the evidence and is necessary for the decision of the
case. That is subject to the proviso that no prejudice will be caused to any party by
its being decided.”37

53. Propell seeks a multitude of declaratory orders. A declaratory order which concerns
a right, is a question of law that the court must determine. The court then exercises a
discretion on whether it grants or refuses the order. The court must examine all

Education Western, Western Cape Government and Others (4842/99) [2000] ZAWCHC 9; 2001 (2)
SA 112 (C) (20 October 2000)
35 Propell provided a revised set of declaratory orders which are reflected in the final orders made by
this court. To the extent that this reflects an amendment to Propell’s notice of motion in the main
application, the amendments are granted.
36 2019 (3) SA 451 (SCA), see also Fischer v Ramahlele (203/2014) [2014] ZASCA 88 (4 June 2014)
37 para 22 Four Wheel Drive) Fischer & another v Ramahlele & others 2014 (4) SA 614 (SCA) para 13,
affirmed by the Constitutional Court in South African Police Service v Solidarity obo Barnard [2014]
ZACC 23; 2014 (6) SA 123 (CC) para 210, and Molusi & others v Voges NO & others [2016] ZACC 6;
2016 (3) SA 370 (CC) para 28. Katritsis 1966 (1) SA 613 (A)
25

relevant factors from the assembled body of evidence to comply with the two -stage
procedure required to determine whether to grant or refuse a declaratory order .38
Nothing in the court’s directives or this judgment offends the dicta in Four Wheel Drive
and Fischer v Ramahlele.

54. Propell also emphasised that the two applications were not consolidated for hearing,
and each had to be heard on its own merits or lack thereof. The complete wording of
each declaratory order sought is reflected in the orders made at the end of this
judgment.

55. The first declaratory order sought is that the Association was not statutorily
created in terms of LUPO when the parent erf of the development was rezoned and
sub-divided and that the Association is a voluntary association.

56. The assertion is supported by the evidence , namely the rezoning documents
establishing the development. The City of Cape Town subsequently confirmed this
position. The Residents Group (in the context of the counterapplication) no longer
disputes this assertion. Although Propell has not identified an existing, future, or
contingent right to obtain this declaratory order, the court is inclined to grant it to
bring finality to this issue.

57. Propell has not satisfactorily demonstrated any existing, future, or contingent right
to realise the second, third, and fourth declaratory orders it seeks. The declaratory
orders sought, relate to the rights of the Association and its members . The court
understands that Propell has undertaken a stepwise exercise in obtaining orders
leading up to the main relief it seeks about the validity of the levy finance
agreement and the security cessions contained therein. Propell submitted that
determining these declaratory orders will assist in finalising the dispute between
the parties.

38 Shoba v Officer Commanding, Temporary Police Camp, Wagendrif Dam 1995 (4) SA 1 (A) at 14F). In
Durban City Council v Association of Building Societies 1942 AD 27
26

58. The second declaratory order pursued by Propell relates to the membership of the
Association. Propell seeks an order that the Association consists solely of owners
of units’ erven in the development.

59. Propell relies on the deeds of sale, the title deeds, and the constitution , which
requires prospective owners to become members of the Association. Propell
indicates that the developer drafted and adopted the constitution at the end of
2007. The Association was deemed to have existed on 15 June 2006, and the
constitution's provisions were applicable on the same date.

60. As alluded to earlier in this judgment, the deeds of sale contain the clause that
each purchaser has scrutinised the constitution of the Association and agrees to
be bound thereby. It is apparent that there was no constitution between 2006 and
2008, when the constitution was finalised and circulated. A reference to a non -
existent document at the time of purchase cannot bind the buyer to its contents
or membership of a non -existent Association. There is no indication that the
developer (or seller in the context of the offer to purchase) sought to obtain the
consent of the owners who bought property before the introduction of the
constitution (or before a copy was handed over to the owners) to be bound by its
terms.

61. Thus, an unknown number of owners can validly raise the defence that they are
neither bound to membership in a non-existent Association nor its constitution.
The second declaratory order Propell seeks cannot be granted.

62. The third declaratory order sought by Propell depends on the court’s finding
concerning the second declaratory order. The order sought relates to the copy of
the constitution attached to Propell’s founding affidavit. Propell wants the court
to affirm that the constitution , as amended in 2010, governs the relationship
between the Association and its members.

27

63. The court cannot grant this order partly for the same reasons provided concerning
the second declaratory order sought. In addition, the 2010 amendments to the
original constitution are inconsistent with its provisions.

64. On the face of it, the amendments did not seek to amend any of the entrenched
clauses. Still, on closer scrutiny, the substance of the amendments proposed by
the Trustees deal with contracts (clause 9), levies (clause 7), and the issue of
consents (part of clause 6, the membership clause). The amended clause 15.6
sought to circumvent the substance of two entrenched clauses , namely clauses
6, the membership clause and clause 7, the levies clause , by inser ting the
additional clause under a different article of the association. Clause 15.7 conflicts
with clauses 6 and 7 as well. Clause 6 did not link the repayment of an owner’s
debt to issuing clearance certificates on alienating their properties. The court has
dealt with the purpose of entrenched constitutional clauses. The aforegoing
questions the validity of the amendments effected to the constitution . In the
circumstances, the declaratory order sought cannot be granted.

65. The fourth declaratory order sought by Propell is that the Association has a real
right against the members as imposed by the conditions of their respective title
deeds. Propell relies on sample copies of the offer to purchase and title deeds of
erven in t he development to support this assertion. Propell cited the Willow
Waters and Kyalami Estates matters to support their contention that the
conditions included in the title deeds constitute real rights.

66. The court has considered this aspect and has provided reasons for finding that the
conditions included in the title deed in casu are not real rights. The court has also
found that the peculiar wording of the conditions in the title deeds distinguishes
them from the characterisation of the rights in the title deeds under consideration
in the Willow Waters and Kyalami Estates cases. In the premises, the fourth
declaratory order cannot be granted.

28

67. As for the fifth declaratory order sought, Propell contends that it, as cessionary of
the Association, can decline to furnish its prior written consent for transferring any
immovable property of its members until all outstanding amounts for that
particular property have been settled. In the sixth declaratory sought, Propell
asserts that the Agreement , as rectified, governs the contractual relationship
between the Association as cedent and Propell as cessionary as well as the
relationship between Propell and the homeowners. In the seventh declaratory
order sought, Propell contends that any claim held by the Association against the
homeowners has been validly ceded to the Applicant. Propell has demonstrated
an interest in determining these rights. It would be convenient to consider the
three declaratory orders sought together.

68. In support of the fifth, sixth, and seventh declaratory orders sought, Propell refers
to the Levy Finance Agreement concluded by the Association and Baedex on 9
November 2010 and the subsequent Sale and Cession Agreement concluded by
Baedex and Propell on 12 July 2011 and attached copies of the respective
agreements to its papers.

69. Propell states further that it sent monthly levy statements to the owners of the
residential properties as part of its obligations under the Agreement. Propell refers
to the rectified clause 6 of the Agreement obtained from this court on 8 February
2017. Propell refers further to the amendment of the description of the formation
of the Association that was also obtained in the court order.

70. Propell refers to clauses 6.1 and 6.2 of the rectified Agreement concerning the
contributions and cession claims, the former about the right to issue consents
and the latter which would take effect automatically and without notice or
formalities upon an event of default.

71. Propell states that the Association breached the Agreement by cancelling its
insurance on 31 March 2020 and receiving a qualified 2019 annual financial
statement. As these constitute events of default, all amounts due by the
29

homeowners to the Association have been automatically ceded to Propell. Propell
is the only party that can now collect the levies.

72. Propell’s written heads of argument merely reproduce the allegations in the
founding affidavit.

73. Propell has relied upon the conditions in the title deeds, the constitution, and the
Agreement to support the declaratory orders sought by it. The sequence of orders
sought indicates that they are interrelated and interdependent . It is apparent to
the court that the Agreement is weighted in favour of Propell. If, on closer scrutiny
of these documents, it becomes evident (which is the case) either partly or
conclusively that the constitution's provisions did not authorise the agreement ,
then the court cannot grant the fifth, sixth, and seventh declaratory orders sought
by Propell.

74. As alluded to in the review of the constitution's provisions, the amendments were
aimed at circumventing clauses 6 and 7. In its written submissions, Propell
criticised the action of the Trustee Committee on 3 August 2020 for the same
reason: effectively amending clause 7 of the constitution relating to levies. Propell
seeks an order declaring that resolution unlawful and void ab initio yet fails to
appreciate that the same argument applies to the 2010 amendments made to the
constitution. 39 The constitution did not authorise the amendments of 2010.

75. As clause 7 of the constitution is an entrenched clause, cession of the right to
collect levies on behalf of the Association to Propell upon default is inconsistent
with the constitution. Likewise, the cession of the right to issue consents on behalf
of the Association to Propell in the event of default is inconsistent with the
constitution. The imposition of levies and the issuing of clearance certificates
constitute entrenched constitutional powers, so they cannot be ceded to a third
party.

39 Paragraphs 26 and 27, Propell’s heads of argument in the main application.
30


76. The court has dealt with the election of five Trustees at the annual general
meeting, two of whom were the “Developer’s Trustees .” The latter two, including
the developer, signed the Levy Finance Agreement, with its onerous terms, even
though the constitution specified that the Trustee Committee comprise three
members, and the resolution required three signatories.

77. The court is cognisant of the principle that parties entering into contracts freely
should be held to the terms of their contracts. On the issue of whether Propell was
obliged to familiarise itself with the internal arrangements of the Association,
Propell cited the case of Grundling v Beyers and others 40 which refers to Royal
British Bank v Turquand ,41 and Foss v Harbottle42 in response to issues raised in the
second court directive . Neither the Turquand Rule nor the Rule in Foss v Harbottle
apply to contracts involving a voluntary association.43

78. In its written submissions, Propell alleged that there is no evidence whatsoever
that Propell or Baedex was aware of the internal arrangements of the Association.
Propell submitted that the Association provided the necessary warranties as per
the Agreement and had , by its conduct at the annual general meeting of 2011,
ratified the agreement with Baedex. The submissions are incredulous and fall to
be rejected out of hand. Clause 1 of the Agreement defines the “constitution” to
mean the constitution of the Association, as amended from time to time. As a
financier making a sizeable loan to a voluntary association, it is inconceivable that
Baedex would not have called for the Association's founding documents. Propell
has relied upon the constitution's provisions to lend credence to its assertion that
the Agreement was validly authorised. A representative of Baedex was present at
the 2010 meeting when amendments were made to the constitution to enable the
association to secure the loan. Clause 12 of the Agreement relates to general

40 Grundling v Beyers and others 1967 (2) SA 131 (W)
41 Royal British Bank v Turquand, (1856) 119 E.R. 886
42 Foos v Harbottle (1843) 67 e.r. 189
43 The court did raise the essence of the rule in oral argument in response to a submission made on
behalf of the Residents Group
31

undertakings and additional terms. Clause 12.4 requires advanced notification of
any proposed changes to the constitution. This clause and clause 1 of the
Agreement presuppose that Baedex possessed and knew of the provisions
original constitution when the Agreement was concluded.

79. Cession agreements, like all other agreements, are subject to proper
authorisation, failing which they may be declared invalid. The court does not have
to make this finding regarding the fifth, sixth, and seventh declaratory orders
sought in the main application . However, sufficient evidence indicates a lack of
authority to conclude the agreement. In the premises, these declaratory orders ,
as sought, cannot be granted.

80. The eighth declaratory order sought by Propell relates to the resolution of the
Association’s Trustees taken on 3 August 2020. The Trustees resolved to withdraw
all legal proceedings instituted by the Association against any resident or member
of the Association. The Trustees resolved further to halt legal actions against any
resident or member to recover arrear levies and/or costs owed to the Association.
The Trustees, in addition, terminated the mandate of the Association’s attorneys.

81. The relief sought can be easily disposed of. Clause 6.7.4 of the Agreement
empowers Propell to recover payment of outstanding owner amounts and the
costs incurred in its name. The Association as cedent cannot enforce its rights
once a security cession takes effect. Propell had the right to institute these
proceedings in its own name in terms of the cession. Since the court has exercised
its discretion to refuse the preceding orders, this declaratory order cannot be
granted. In the premises, the court need not burden this judgment with the
allegations and submissions made on behalf of Propell concerning the eighth
declaratory order sought.

82. Propell has been largely unsuccessful in the main application. The Association’s
involvement was limited to filing an answering affidavit, and the court has rejected
32

any involvement of the Residents Group in this application. The appropriate cost
orders in the main application will be considered later in this judgment.

THE COUNTERAPPLICATION

83. The counterapplication is fraught with flaws, namely repeated and serious failures
to abide by the court rules and court orders, failure to comply with the specified
periods for the filing of additional papers , failure to file , index, and paginate the
papers timeously or at all, failure to issue notices of intention to amend papers,
amending papers without approval, and including new material in the replying
affidavits. Furthermore, the legal representatives were confused about the
applicants they represented, paid little attention to detail, permitted
unsubstantiated allegations in the papers , and unnecessarily duplicated
documents and lengthy confirmatory papers. An unprecedented second set of
papers with a new notice of motion and a n answer to the main application was
filed in February 2024. Nothing further was heard of the Residents Group until the
eve of the rescheduled hearing in May 2024 , when they once again provided a
barrage of documents belatedly.

84. This court entertained the allegations in the second affidavit to the extent that they
comprised allegations supplementing the counterapplication44 In addition, any
information of a material nature that was included in the annexures was also
considered. The court shall deal with some of these aspects in this judgment. With
the papers in the counterclaim extending way beyond 1500 pages, the court can
only deal with relevant and legally cogent aspects of the declaratory orders
sought.

85. For now, the court proceeds to the relief sought by the 161 Applicants cited in the
last incarnation of the papers. They are referred to collectively as the Residents
Group. The Association is cited as the first Respondent. The Association did not

44 On 28 July 2023, the court permitted the Residents Group to supplement their papers.
33

participate in this application. Of the Respondents, Baedex, the second
Respondent, and Propell, the third Respondent who opposed the application,
shall be referred to by name or as Propell. 45 Of the further Respondents the
Residents Group sought to join, the City of Cape Town and Renier van Rooyen
provided explanatory affidavits. The three other trustees who served in 2010 did
not receive the notice of joinder and did not participate in the application.

86. Propell repeated the contention raised in the main application that the
applications had not been consolidated for hearing and adjudication. Each
“application should be considered on its own merits or demerits thereof and that
there cannot be any cross -pollination between the two separate and distinct
applications.”

87. The Residents Group's first declaratory order concerns the Association. The
Residents Group s ought affirmation that the Association was wrongfully
constituted and/or established and never existed from inception as it was neither
established in terms of LUPO nor the Sectional Titles Act and/or the common laws
of South Africa. During the oral argument, Counsel for the Residents Group
informed the court that it had withdrawn this declaratory order. It should have
been apparent to the Residents Group that there was no merit in pursuing this
aspect of their case once the City of Cape Town filed its explanatory affidavit in
April 2023. They persisted. The supporting allegations and documents comprised
a significant part of the counterclaim . They must have caused the Respondents
considerable time and effort to traverse those documents as the court did . The
court has factored the latter into the order of costs it makes.

88. The second declaratory order sought relates to a resolution allegedly made by the
Trustees on 21 September 2010 regarding the amendments to the Association's
constitution. This order sought is ill-informed. A special general meeting occurred
on 21 September 2010 . The Residents Group did not provide evidence of a

45 Baedex, according to the deponent to the answering affidavit, has changed its name to Propell
Specialised Finance (Pty) Ltd (para 20, page 118 record)
34

resolution the Trustees took on that date. The amendments to the constitution
were suggested by the Trustees and the developer well before 21 September 2010,
as evidenced by the notice of the special general meeting included in the second
set of papers filed by the Residents Group. There is no basis for the declaratory
order sought. Again, the Residents Group persisted with obtaining unsustainable
relief despite being informed of their error.

89. The third declaratory order sought by the Residents Group concerns the 2010
amendments to the constitution, which included the insertion of clauses 15.6 and
15.7 to permit the Association to make a loan and pledge its assets in favour of
Baedex. The Residents Group wants the court to declare the amendments
unlawful, null and void and to set them aside.

90. The Residents Group attached a copy of the constitution to the application. 46
Suppose the constitution's provisions did not permit the amendments to the
constitution. In that case, the changes voted for and effected by the special
general meeting of 21 September 2010 are unlawful and fall to be set aside. The
latter is partly a restatement of the written submission made on behalf of Propell.
It would also mean that the Trustee's resolution dated 20 October 2010 and the
Agreement concluded between the Association and Baedex would suffer the
same fate. The question is whether the Residents Group have made a case that
the amendments are unlawful and, therefore, null and void.

91. The Residents Group alleged that the Association circumvented the constitution's
provisions to secure the loan. The Residents Group alleged that the amendments
were not effected in compliance with the constitution and referred to the
requirements of the amendments clause. They alleged that the Association alone
has the right to impose levies against its members. The rights to the levies remain
personal between the Association and its members, and it is impossible to
circumvent that position.

46 “SHG 4”
35

92. The constitution is the contract between the Association and the homeowners.
The constitution delegates setting and collecting levies to the Trustee Committee.
The levies clause in the constitution is entrenched . The provisions of the clause
may not be amended. Although the Association outs ourced the function of levy
collection almost from its inception, the right to collect levies which is entrusted
to the Trustee Committee, is not a right that can be transferred or ceded. The same
principle applies to the issuing of clearance certificates. The nature of the
personal right thus created , i.e., the homeowner's obligation to the Association,
within the peculiar circumstances of this case, would suggest that it excludes its
transfer.

93. In the second set of papers, the Residents Group identified two groupings of
Applicants. The first were owners of properties before the amendments were
effected. It is alleged on their behalf that they were not alerted to the proposed
amendments and were not subsequently requested to agree to them. The second
group purchased properties after the amendments to the constitution were made,
and the Association secured the loan. It is alleged on their behalf that they should
have been informed of the loan and the debts of the Association.

94. The court observed from the constitution's provisions that the levies (clause 7)
and consent clauses (part of clause 6 of the membership clause) were
entrenched. The court noted further that the amendments were directed at
circumventing the provisions relating to the levies and issuing consents contained
in the entrenched clauses. The court did not have to find in the main application
that the amendments effected to the constitution were beyond the powers of the
Association as conferred by its constitution and, therefore, fell to be set aside.

95. The Residents Group attached a notice issued on 13 August 2010 by the company
managing the Association . The notice informed homeowners of the special
general meeting on 22 September 2010.47 The meeting was held on 21 September

47 “LH163” , the minutes reflect that the special general meeting was held on 21 September 2010
36

2010. The notice refers to the intention to amend the constitution and contains
the proposed amendments as the developer and Trustees envisaged . However,
the notice did not comply with the constitutional requirement to explain the
reasons for and the effects of the proposed amendments. The notice states that
the developer can change the constitution, but the Trustees wanted the owners to
participate in the decision and understand its content.

96. The notice does not refer to any presentation by a financier or any proposal to
obtain immediate financing for the Association. The constitution required the
notice to specify all items on the agenda of the meeting. The minutes of the special
general meeting indicate that a decision to approve financing was taken at this
special general meeting. Propell relied on this notice to answer the repeated
allegations of the Residents Group that there was no meeting and that Propell
could not produce the attendance register of the special general meeting. Propell
states that the notice was evidence of the meeting being held but disavowed any
prior knowledge of the notice.

97. The fact that the notice gives the incorrect date for the meeting, i.e., 22 September
2010, one day after the meeting was held, escaped the parties' attention. Clause
18.2 of the constitution relates to an accidental omission to give notice of a
meeting, any resolution, any other notification, or to present any documents. The
clause states that non-receipt of a notice shall not invalidate the proceedings or
any resolution passed at any meeting. It does not address the instance where
defective notices are gi ven. An accidental omission presupposes a factual
occurrence. There is no evidence in the papers to support such an occurrence.

98. The incorrect date reflected on the notice may have invalidated it or rendered it
voidable. If the notice is otherwise valid, and the error is merely a clerical mistake,
the notice may be deemed effective if the recipients waive any objection to it. If a
recipient acted appropriately , the recipient could be estopped from raising a
defence of this nature. As mentioned, the Residents Group did not attack the
notice on the grounds above. The fact, however, is that the owners were invited to
37

be part of a decision that required a special general meeting . The notice was
defective in material respects, i.e., the date, the failure to provide reasons for the
amendment or the effects of the amendment, as well as the failure to indicate that
immediate funding for the Association from an external source would be
considered and voted upon.

99. Propell relied upon the minutes of the special general meeting , which indicated
that a quorum was present and that the decision to change the constitution was
agreed upon unanimously. Scrutiny of the minutes records the names of three
persons present and accounts for two more persons, i.e., the developer who co -
signed the minutes and Willem Le Roux, who made a presentation on behalf of
Baedex. The minutes record that the proposals to amend the constitution were
carried unanimously.

100. Propell submitted in response to the notice as well as the defects apparent
therein, that the Residents Group had not relied upon it in support of the third
declaratory order sought. The Residents Group did not contend that they received
insufficient notice, as their case was that the meeting did not occur at all. Propell
relied upon clause 18.2 of the constitution relating to the accidental omission to
give notice of a meeting . This did not invalidate the proceedings, nor was any
resolution passed at the m eeting. Propell submitted, surprisingly, that the
amendment of the constitution was optional. The members unanimously
approved the funding from Baedex and ratified it by their conduct at the 2011
annual general meeting. Propell needs to be corrected concerning the latter
submission, as there was no reference to any financing by Baedex in the minutes
of either the 2010 or 2011 annual general meetings. The minutes of the 2011
annual general meeting refer at most to Baedex taking over the collection of levies
and an inquiry as to why the fees for Baedex had more than doubled.

101. In response to the second court directive, the Residents Group submitted that the
date reflected on the notice did impact the decision to amend the constitution.
They argued that if they had attended the meeting, there would have been a
38

register to indicate their attendance. The homeowners did not know about the
meeting, and the notice needed to be corrected. Concerning the omissions in the
notice, the Residents Group submitted that the homeowners were entitled to
know about the agenda of the meetings.

102. The difficulty concerning the notice is that it is properly before the court,
constitutes evidence supplementing the counterapplication, and its contents or
lack thereof , are material to the decisions taken at the 2010 special general
meeting. Propell had, in a similar vein, provided and relied upon the minutes of the
special general meeting and the 2010 and 2011 annual general meetings, as well
as the constitution of the Association, without determining whether the decisions
taken at the meeting were within the powers of the Association. Propell also relied
upon the notice in their answering affidavit and written and oral submissions to
prove that the 2010 special general meeting had occurred . Both parties were
allowed to respond to what was glaringly apparent to the court before this
judgment was finalised, and their submissions were duly considered. The court
finds this evidence to be material to determining whether the amendments
effected to the constitution were valid.

103. The court has considered several cases regarding the requirement to provide
notice of a forthcoming meeting. The following dicta are relevant to these cases.

“The respondent failed to give proper notice of the meeting to the applicant who
was entitled to same. This failure is an irregularity which invalidates the
proceedings. Resolutions taken at a meeting where persons who were entitled to
receive notice or required to receive notice thereof did not receive such, are
ordinarily invalid. 48 The application of the above rule need not be applied
absolutely where the issues decided are non -contentious, trivial or of a formal

48 Nyoka v Cricket South Africa (2011/8727) [2011] ZAGPJHC 32 (15 April 2011) and the cases cited
therein, namely Mtshali v Mtambo 1962 (3) SA 469 (GWLD) at 472 D-E; Wessels and Smith v Vanugo
Construction 1964 (1) SA 635 (O) at 636G -637H; African Organic Fertilizers and Associated
Industries v Premier Fertilizers Ltd 1948 (3) SA 233 (N) at 239-241; Visser v Minister of Labour 1954
(3) SA 975 (W) at 983C-984E)
39

nature.49 However, the Courts have applied a common sense approach taking all
relevant factors into account, including the nature of the business to be
transacted.”50

104. The nature of the business to be transacted at the 2010 special general meeting
was neither trivial, formal, nor of a non-contentious nature. In the circumstances,
the Trustees did not give notice of the meeting , which was consistent with the
constitutional requirements.

105. The Residents Group raised several further contentions regarding the financing of
the Association in 2010. They asserted that there was no provision in the
constitution to make or secure loans without the consent of the Residents. The
reasons for taking the loan were not disclosed to the Residents. There was no
indication that the Association was struggling financially due to the failure to
collect levies. For the Association to secure the loan, it needed to circumvent the
constitution by amending it. The amount owed to the loan account was R25
million. Propell did not challenge the latter allegation . The amendments to the
constitution permit the Trustee Committee to borrow the monies required to
perform its functions and exercise its powers. The amendment to the constitution
allowed the Trustee Committee to borrow the funds needed by it. No evidence
before the court relates to the second requirement, i.e., the need for financing.

106. As alluded to, the defective notice failed, among others, to provide reasons for the
amendments and did not disclose the imminent financing of the Association. The
constitution contains a material provision relating to the overall financial state of
the Association. Clause 7.8 of the constitution, an entrenched clause, relates to
the shortfall in financing the activities of the Association. The clause exempts the

49 Visser v Minister of Labour (supra), African Organic Fertilizers and Assoc Industries v Premier
Fertilizers Ltd (supra))
50 (African Organic Fertilizers and Associated Industries v Premier Fertilizers Ltd
(supra) at 241 and Visser v Minister of Labour (supra) at 983C )
40

developer from paying levies if he owns a unit erf in the complex. However, the
developer is required for the duration of the development period to:

“ …pay the difference between the actual expenses incurred (by) the Association,
and the aggregate of the levies payable (as opposed to paid) jointly by the
members who are the registered owners of the unit erven each month from time
to time, plus any other income earned by the Association, including, inter alia,
additional levies payable by members…excluding any provisions for a reserve
fund. ”

107. The minutes of the 2010 annual general meeting do not contain any information
relating to the finances of the Association to determine why the external financing
was necessary, given that the developer was required to make up part of the
shortfall in the expenses incurred by the Association during the development
period. The minutes reflect that there was discussion about the financial
statements, the budget, the levies, proposals to finance an electrified fence from
another source, and the appointment of the auditors.

108. The Association's trustees were appointed. Five Trustees were appointed: two
from the developer, Renier van Rooyen and Johan Odendal, and three on behalf of
the owners. Th e election of Trustees did not comply with the provisions of the
constitution, which allowed for three Trustees, the wording of which is interpreted
to include the developer’s representative . T he number of trustees appointed by
the 2010 annual general meeting impacted the resolution that led to the
conclusion of the financing agreement with Baedex.

109. A copy of the annual general meeting minutes a year later stated that 473 owners
were represented in person or by proxy at the meeting as per the attendance
register. The minutes reflect that the Association had an income of R177 548
(allegedly inflated from the previous year’s income) and expenses o f R972 460
41

with a surplus of R67 414. R445 922 was listed as expenses for security and an
equal amount for salaries and wages.

110. The minutes refer to Topnotch, the entity managing the estate on behalf of the
Association, and that Topnotch could not pay all the invoices. 428 erven still
required development. Further discussions centred around the guards, garden
services, armed response, increased levies payable by members to R250 per
month, and the accommodation of informal occupants outside the development.
Specific reference was made to the request to reduce Topnotch’s management
fees, as “Baedex is now collecting the levies . ” There was an inquiry about why
Baedex's fees had more than doubled. Reference was also made to owners who
were not paying their levies. There was no specific reference to the security and
cession agreements forming part of the levy finance agreement concluded with
Baedex.

111. The content of the minutes of the annual general meeting of 2011 provides some
interesting background information relating to the development . Costs were
incurred to repair and maintain the access control gate. Although the
development was advertised as a gated community, the court understands that
the City of Cape Town removed the gated access as it was not part of the rezoning
application. The court understands further that the City has and continues to
provide services and maintain the common areas.

112. The reference to 428 erven that still required development as of 19 July 2011
meant that there were fewer erven developed at the time of the 2010 annual
general meeting. The court needed to be provided with the number of
homeowners who were members of the Association in 2010 or 2011, which would
have provided a clearer background to the issues relating to the voting and
passage of the constitutional amendments and the approval of the loan in 2010.
The court also pondered the high cost of security and salaries if only 173 erven of
the 601 had been developed up to this stage of the development and whether
those costs were attributable to the Association or were the developer’s costs.
42


113. The following dictum from Grundling v Beyers and others is relevant to the third
and fourth declaratory orders sought by the Residents Group:

“Now, the constitution does specify certain acts which the Union is required or
permitted to do ; it often specifies too the manner in which those acts are to be
done. The former is the Union’s powers, the latter, its internal management. If it
exceeds the former powers , that is, does an act that the constitution does not
require or permit it to do, that act is ultra vires and null and void. Such an act
cannot be validated by ratification or estoppel...If the act is within its powers, but
the manner of doing it deviates from or is contrary to the constitution, it is not null
and void; at most, it is voidable, but it can be validated by ratification or
estoppel. ”51

114. It is thus apparent that the 2010 amendments to the constitution of the
Association we nt beyond the powers of the Association as contained in its
constitution. A defective notice of the special general meeting was issued, the
amendments relating to levies and the issuing of consents were not permitted, the
reasons for and the effect of the amendments were not explained, and no notice
of the intention to consider and approve immediate financing for the Association
was given. The Residents Group must prevail as far as the third declaratory order
sought in the counterapplication is concerned.

115. The fourth declaratory order attacks the Trustees' resolution of 20 October 2010,
which was issued before the conclusion of the levy finance agreement.

116. It would ordinarily be unnecessary for the court to consider the case presented by
the Residents Group and the opposition to it by Baedex and Propell following its
finding that the constitution did not authorise the 2010 amendments . However,
due to the protracted litigation between the key parties , the need to bring finality

51 Grundling v Beyers and others 1967(2) SA 131 (WLD) at 139H-140A
43

to th ese applications, and out of an abundance of caution , the court shall
undertake the exercise to consider the fourth declaratory order sought by the
Residents Group.

117. The developer and the Residents Group included copies of the resolution passed
by the Trustees at a meeting held on 20 October 2010 (“the Resolution, the
Trustees Resolution”).52 The heading of the resolution states that the resolution is
an annexure to the loan agreement, i.e., the levy finance agreement. The Trustees
resolved:

117.1. to obtain a loan from Baedex upon such terms and conditions as may
be required by Baedex,
117.2. to cede and pledge the following assets in favour of Baedex as
continuing covering security for the performance of its obligations from
time to time due or owing to Baedex, including , without limitation, its
obligations in respect of the loan:
117.2.1. all rights, title, and interest in and to the levies and non-levy
amounts (“the levies”) concurrently and in the future owing
to the Association,
117.2.2. the right to issue consents and any existing or future claims
of any nature which it has or obtains against any third party
which fails to comply with the title deed restrictions
contained in the title deeds of such unit erven and the
constitution of the Association as these relate to consents,
117.2.3. all rights, title, and interest in and to any claims for loss
suffered due to theft or misappropriation of trust monies
that it has or may acquire against the fidelity fund
established in terms of the Estate Agency Affairs Act 112 of
1976.

52 “AVS 6” in answer to the counterapplication, and “RvR6” to the explanatory affidavit provided by
Van Rooyen.
44

117.3. That all levy amounts are payable in advance by owners and that the
Association ratifies the amount and terms of payment of all levies that
have already been declared and imposed on owners,
117.4. To appoint Baedex irrevocably and on behalf of the Association as its
lawful agent and attorney for the duration of the loan for as long as any
amounts remain owing in terms of the agreement, to collect the levies
on its behalf and to issue consents on the terms set out in clause 6 of
the agreement,
117.5. The Association authorises the imposition of the collection and
administration charges as detailed in the schedule hereto with
immediate effect,
117.6. The Association irrevocably authorises Baedex to debit the interest,
fines, collection, and administration charges to the levy accounts of
the owners on behalf of the Association as and when such amounts are
incurred in relation to the unit erven owned by the particular owners,
117.7. Any two Trustees of the Association be and are hereby authorised to
negotiate the terms of the agreement as they , in their absolute
discretion, deem fit, to sign the agreement and /or any amendments to
the documentation as mentioned above upon such terms and
conditions as they may in their absolute discretion deem fit… 53

118. The resolution's content indicates that the Trustees received a copy of the levy
finance agreement before signing it. The Resolution included a schedule outlining,
among other things, the loan amount and the 34.8% interest rate charged daily
and compounded over twelve periods that would be levied on it.

119. The Residents Group contended that the resolution to take the loan violated the
homeowners' rights as contained in the constitution, and the Trustees acted ultra
vires. They asserted that the right between the Association and themselves was a
personal right that could not be ceded. The Association was not entitled to cede

53 “RvR6” to the Replying Affidavit in the counterclaim. The resolution has not been reproduced
verbatim.
45

its rights to Baedex. The developer presided over the amendments and ceded the
rights to Baedex.

120. The Residents Group alleged that the Trustees needed to meet to resolve the
terms of the resolution. The resolution required the signature of three trustees, but
only two signed. They alleged that the resolution gave rights to Baedex alone
(meaning that it was heavily weighted in favour of Baedex). The terms of the
resolution were inconsistent with the constitution.

121. Propell responded by contending that the Agreement was preceded by a special
general meeting with the required quorum, approved by the owners at the annual
general meeting, and later reconfirmed at a subsequent general meeting. As
alluded to, t he latter allegation is incorrect. The 2010 and 201 1 annual general
meeting minutes do not refer to the levy finance agreement. The 2011 annual
general meeting references Baedex taking over the levy collections and the level
of fees it charges.

122. The two Trustees who signed the resolution were the “Developers Trustees . ” As
alluded to, the constitution permitted the developer to appoint one Trustee. There
is no evidence that the Trustee Committee met to consider the resolution. This is
not surprising considering the disclosure made by Andre van Schaik, a director of
Baedex and Propell, that his office drafted the resolution signed by two Trustees.54
In answer to the Residents' Group's allegations , van Schaik accepted that the
constitution required the Trustee Committee, i.e., three Trustees, to sign the
Resolution. Van Schaik accepts that the resolution was signed by Van Rooyen and
Odendal, two out of three trustees. Van Schaik states that at that stage , the
Association had only three trustees, and Baedex’s legal advisors advised him that
the two signatories of the resolution legitimated the document (as far as Baedex
was concerned).


54 Para 35, Propell’s answer to the allegations relating to the terms of the Resolution and the loan raised
by the Residents Group in the second set of papers
46

123. The resolution specifies that any two Trustees , as they, at their absolute
discretion, deem fit, can sign the Agreement and make any amendments to it.
Neither the original constitution nor the amendments provided the Trustees with
this power, nor was there compliance with the requirement that resolutions had
to be passed by a majority of Trustees ( only 2 out of 5 Trustees signed the
resolution at the relevant time).

124. Neither the constitution nor the resolution held by members in the special general
meeting held on 21 September 2010 (to the extent that can be ascertained by the
minutes) permit the Trustees to cede any of the Association’s assets, its
obligations in terms of issuing consents, its rights to make claims for theft against
the fidelity fund, or to surrender its legal standing to a financier in so far as the loan
agreement was concerned. Clause 16.6 of the constitution states that members
are not bound by resolutions taken by the Trustee Committee that go beyond their
powers. In addition, the entrenched clauses of the constitution relating to levies
and the issuing of consents on alienation of properties by owners would render
cession of these powers, i.e., the right to collect levies and issue consents,
unconstitutional and invalid.

125. Propell contended in its written submissions that the decision to obtain financing
from Baedex was taken unanimously at the special general meeting. The
resolution is not illegal or inappropriate. The Residents Group denied that there
ever was a special or annual general meeting. Propell submitted that clause 15.1
of the constitution empowered the Trustee Committee to conclude the loan
agreement with Baedex without the member's approval. Clause 15.1 defines the
ambit of the powers of the Trustee Committee. The flaw in this argument is that
the Trustee Committee and the developer decided to go out to the membership to
include them in the decision -making process. Once they had done so, they were
obliged to obey the constitution's provisions, regardless of the rights allegedly
enjoyed by the developer. Propell also cited clause 16.3 of the constitution, which
related to a quorum of members for a meeting of the Trustee Committee. A
quorum for a meeting and the conclusion of a contract are two different matters.
47


126. Propell referred further to clause 18.2 of the constitution regarding the number of
votes required to carry a motion. Propell argued that a member of the Association
could not evoke the court’s aid concerning an irregular act in its internal
management that can be validated or sanctioned by a majority in a subsequent
general meeting. Propell cited the Turquand Rule in support of the latter
contention. The rule does not apply to contracts with associations, but if the
argument raised is about the essence of the rule, i.e., prior knowledge of the
internal arrangements of the association, then that argument has already been
rejected. Propell’s reliance on the warranties provided by the Association in clause
11 of the levy finance agreement in support of its all eged ignorance of the
constitutional provisions of the Association is also rejected . Propell required a
special resolution of the Association to validate the contract between itself and
the Association. It is also incorrect that the notice of the special g eneral meeting
was part of the late answer of the Residents Group to the main application and ,
thus, subject to an application to strike out as it did not constitute material
supplementing the counterapplication. The annexures were included and referred
to as part of the supplementary allegations to the founding affidavit in the
counterapplication. Propell was afforded the time and opportunity to respond to
the allegations, supplementing the counterapplication and its annexures.

127. There is no need to consider the brief argument made by the Residents Group that
the Agreement offends public policy and is thus unenforceable.

128. The court finds that the Resolution exceeded the powers of the Trustees and the
Association. The Association was not permitted to cede entrenched functions
relating to levies and the issuing of consents. The Trustees who signed the
resolution were not empowered to do so . There was no meeting of the Trustee
Committee to consider the terms of the resolution. The resolution was prepared
in the offices of Propell. In the premises, the court has no hesitation in making the
fourth declaratory order sought by the Residents Group. It follows that the levy
finance agreement concluded by the two Trustees and Baedex is also invalid.
48


129. Two further issues relating to the Agreement deserve a mention in this judgment.
The Residents Group attached a copy of a notice issued by the Association's
managing company dated 12 April 2014 . It addressed the homeowners and
informed them that Propell intended to terminate its contract with the
Association.55 The notice states that Propell decided not to fund the non -paying
owners. The notice states further that Propell referred to the Willow Waters case,
and as bondholders stood first in line to recoup their debt owed by owners, there
was no guarantee that Propell would get their money once a property w as sold.
The notice further stated that Willie Le Roux of Propell estimated that the
Association owed Propell about R3.3 million. The Agreement required the
Association to pay th e outstanding loan within three months after the notice of
termination. The notice adds that Propell was unprepared to put themselves in
more debt. An agreement was reached with Pro pell to pay the debt over 24
months. The notice goes on to say that Propell is only funding the owners who are
paying their levies, and the Association would have to double their income
(presumably to settle the debt ), hence the increase in levies. The levy collection
would have to revert to Topnotch (the company managing the Association).56

130. In its answering affidavit, Propell dismissed the notice and the averments made
by the Residents Group as hearsay and inadmissible. Propell made no attempt to
confirm or refute the notice or to state whether it had been retracted. The court
finds that th is notice is relevant and material to the issues raised in these
applications. The parties were invited to make submissions on this notice in
addition to the other issues raised in the court’s second directive. The court has
alluded to the basis upon which hearsay evidence is considered in this judgment.

131. It suffices to say that a notice of contract termination implies that a party intends
to end the contract. The notice period , as well as the arrangements for the
repayment of Propell’s debt, was outlined in the contract. No evidence is placed

55 “LH 165” and paragraph 38 of the second set of papers filed by the Residents Group.
56 “LH165”
49

before the court to gainsay that the notice period had run its course and that the
Levy Finance Agreement had terminated.

132. Propell stated that the loan agreement was between Baedex and the Association.
Propell “never loaned any money to the Association. ” The latter allegation begs the
question of how the loan amount has increased tangentially over fourteen years
and threatens to continue into perpetuity. Propell states further that one of the
reasons why Baedex or Propell have not sued the Association for the outstanding
loan amount is that the Association is defunct and that there are no longer any
Trustees.

COSTS AND ANCILLARY ISSUES

133. The two applications attracted a whole host of intervening applications, including
applications for condonation, postponement of the hearings, and joinder
applications. The orders made concerning them are not repeated in this judgment.

134. On 11 February 2024, this court granted a postponement of the hearings and
made the requisite orders as to costs. The court condoned the Residents Group’s
late filing of its second set of papers to the extent that it contained allegations
supplementing the founding affidavit in the counterapplication. The court had
permitted the Residents Group to supplement their founding affidavit in an order
dated July 2023. The court had considered the second set of papers filed by the
Residents Group. As th e affidavit and the annexures contained allegations and
submissions of a material nature, the papers were permitted in the interests of
justice. The counterapplication, as supplemented, allowed the parties to ventilate
their positions as comprehensively as possible in attempting to bring finality to the
protracted dispute between them. The court order was made subject to a striking-
out application to be raised by Propell.

50

135. Propell’s application to strike out material from the second set of papers filed by
the Residents Group is granted in so far as it relates to paragraphs 53 to 92 of the
second set of papers . They are struck from the record , and the appropriate cost
orders are given below.

136. Both Propell and the Residents Group sought adverse cost orders against each
other.

137. Regarding costs in the main application, the Association filed its answering
affidavit but had no further involvement. The court understands that the
Association has been dissolved in the interim. No order of costs is warranted in
favour of the Association. The Residents Group failed to file their papers
timeously, and although they submitted written arguments and were allowed to
raise oral arguments , the court has decided to ignore their submissions. As
indicated in the preceding paragraph, their answer to the main application is
struck from the record. The Residents Group cannot claim any costs from
opposing the main application.

138. Determining costs in the counterapplication is more tenuous. The Residents
Group made lengthy allegations relating to the legality of the Association. In
addition, the court has outlined the epic effort required to traverse their papers to
understand the ambit of their case and has to consider their flagrant disobedience
of the court rules and court orders. The legal representatives of the Residents
Group must shoulder the responsibility for much of the transgressions that
ensued. The Residents Group alleged in their condonation application s that they
were engaged in fending off the numerous cases brought against them in the Kuils
River Magistrates Court , and they could not divert funds to these applications.
Propell confirmed the court’s view that t he counterapplication was unnecessary
as all of the issues raised therein could have been raised in opposition to the main
application. The legal representatives submitted that they could not proceed until
they received funding to represent the Group. The costs or der in the
51

counterapplication has to reflect the court’s displeasure regarding the conduct of
the counterapplication.

139. The court declines to make any orders regarding case number 2944/2013. The
application was not placed before the court. The parties can consider that any
further relief they sought in their respective notices is dismissed. The rule nisi
issued by this court for the joinder of the sixth, seventh, and eighth Respondents
is discharged. The court believes that the Fifth Respondent failed to fully explain
the allegations made against him as the developer of the complex and member of
the Trustee Committee i n the counterapplication. No cost orders were sought
against the fifth Respondent, and none will be made.

140. In conclusion, the court then makes the orders that follow.

ORDERS

The following orders relate to the relief sought in case number 17198/2021.

141. It is declared that the First Respondent (the Summerville Homeowner’s
Association) is a voluntary association and that it was not a condition in terms of
the Land Use and Planning Ordinance 15 of 1985 that a homeowner’s association
be formed when the rezoning and subdivision of portions 1to 4 of Farm 439 and
remainder farm 439, Hagley, were approved.

142. The court declines to declare that the First Respondent consists solely of
members who are owners of Unit Erven of the rezoned and subdivided portions 1
to 4 of Farm 439 and remainder Farm 439, Hagley, which was consolidated and
now known as erf 2501, Hagley.

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143. The court declines to declare that the constitution of the Summerville
Homeowners Association and any legitimate amendments to it govern the
relationship between the First Respondent (the Summerville Homeowners
Association )and its members.

144. The court declines to declare that the First Respondent (The Summerville
Homeowners Association) has a real right against the members as referred to
above, as imposed by the condition of their respective title deeds.

145. The court declines to declare that the Applicant (Propell as cessionary) of the
First Respondent (the Summerville Homeowners Association as cedent) can
decline to furnish its prior written consent for the transfer of any immovable
property of the members/owners, referred to in paragraph 2 u ntil all outstanding
amounts for that property as per the Constitution have been settled.

146. The court declines to declare that the Levy Finance Agreement as rectified,
between Baedex Financial Corporation (Pty) Ltd and its successor in title and
rights, the Applicant (Propell) and the Summerville Homeowners Association
dated the 9 th November 2010 governs the contractual relationship between the
Applicant (Propell as cessionary) and the First Respondent (Summerville
Homeowners Association as cedent) and Respondents (the Homeowners) 2-602.

147. The court declines to declare that any claim(s) that the First Respondent (the
Summerville Homeowners Association) has or may have against Respondent 2 -
602 in terms of the First Respondent’s Constitution has been validly ceded to the
Applicant (Propell).

148. The court declines to declare the resolution dated August 3, 2020, unlawful, null,
and void ab initio.


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The following orders relate to the relief sought in case number 20088/2022.

149. The court declines to declare that the Summerville Homeowners’ Association
has been unlawfully and wrongfully constituted and/or established and to be
deemed to have never existed from inception on the basis that the property
development was neither established in terms of the Land Use Planning
Ordinance of 1985 nor in terms of the Sectional Title and/or the common laws of
the Republic of South Africa.

150. The court declines to declare that the resolution made by the Trustees of the
time of the Summerville Homeowners’ Association dated 21 September 2010, in
terms of which the said Trustees resolved that the Constitution of the SHOA, has
to be amended, unlawful, null and void and therefore to be set aside.

151. The court declares that the amendment of the Constitution of the Summerville
Homeowners’ Association, in particular, the amendment of clauses 15.6 and 15.7
of the aforesaid constitution in terms of which it was amended, to allow the SHOA
to make a loan and subsequently pledge its assets as security for the
abovementioned loan in favour of Baedex Financial Corporation (Pty) Ltd,
unlawful, null and void and is set aside

152. The court declares that the resolution made by the Trustees at the time of the
Summerville Homeowner’s Association dated 20 October 2010 in terms of which:

152.1. The Association obtained a loan from Baedex Financial Corporation
(Pty) Ltd in the amount of R1 000 000 (One Million Rand ) upon such
terms and conditions as may be required by Baedex;
152.2. The Association cede and pledge certain assets (as described in sub -
clauses 2.1 to 2.3 of the Levy Finance Agreement in favour of Baedex
Financial Corporation (Pty) Ltd as continuing covering security for the
due performance of all the obligations from tim e to time due or owing
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to Baedex, including without limitation its obligations in respect of the
loan;
152.3. Payment of all levies and non -levy amounts every month and in
advance by owners as from the date the resolution is taken;
152.4. any payments to the Association by and on behalf of the owners shall
be deemed to have been made upon the date on which such payment
is received in the Association’s nominated banking account;
152.5. The Association, to the extent necessary, ratifies the amount and terms
of payment of all ordinary levies, special levies, additional levies, and
non-levy amounts that have, as at the date of passing of this resolution,
already been declared and imposed on owners;
152.6. The Association irrevocably appoints Baedex Financial Corporation
(Pty) Ltd as its lawful agent and attorney for the duration of the loan and
as for as any amounts remain owing in terms of the agreement, to
collect the levies and non -levy amounts on its be half and to issue
consents on the terms set out in clause 6 of the agreement;
152.7. The Association authorises the imposition of the collection and
administration charges as detailed in the schedule hereto with
immediate effect;
152.8. The Association irrevocably authorises Baedex Financial Corporation
(Pty) Ltd to debit the interest, fines (if applicable), and collection and
administration charges to the levy accounts of the owners on behalf of
the Association as and when such amounts a re incurred in relation to
the unit erven owned by the particular owners;
152.9. Any two Trustees of the Association be and are hereby authorised to
negotiate the terms of the Agreement (incorporating the cession and
pledge and the appointment of Baedex Financial Corporation (Pty) Ltd
as the Association’s agent as referred to in paragr aphs 2 and 4 of this
resolution) as they in their absolute discretion deem fit, to sign the
agreement, and/or any amendments to the documentation mentioned
above, upon such terms and conditions as they may in their absolute
discretion deem fit, and to sign all documents, and to do all such other
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Case Number 17198/2021
Counsel for the Applicant: S Mouton
Attorney for the Applicant: Francois Burger

Case Number 20088/2022
Counsel for the Applicant: A A Mbenyana
Attorney for the Applicant: Keith Jenkins
An attorney with right of appearance for the 2nd and 3rd Respondents: F Burger

Date of hearing: 13,14 May 2024

This judgment was delivered to the parties by e-mail at 10h00 on Tuesday, 23 July 2024. The
delay in delivering this judgment was occasioned by the opportunity afforded to the parties
to supplement certain aspects of their submissions.